Q1 2022 ABIOMED Inc Earnings Call
[music].
Good day, and thank you for standing by and welcome to the Q1, 2020.2 Abiomed, Inc earnings Conference call Covid.
Time, all participants are in a listen only mode.
And the speaker's presentation, there will be a question and answer session.
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I would now like to hand, the conference over to your Speaker today, Todd Trapp Chief Financial Officer. Please go ahead.
Yeah.
Good morning, and welcome to Abiomed is first quarter of fiscal year, 2020.2 earnings conference call.
This is Todd Trapp, Vice President and Chief Financial Officer and.
And I'm here with Mike Minogue, Abiomed, Chairman, President and Chief Executive Officer.
The format for today's call will be as follows.
First Michael will discuss first quarter business and operational highlights.
And then I will review, our financial results, which were outlined in our press release.
After that we will open the call to your questions.
During the call, we will discuss certain financial information on a non-GAAP basis.
This non-GAAP information is provided to enhance your overall understanding of our current financial performance.
The presentation of this additional information should not be considered and isolation or as a substitute for results or superior to results prepared in accordance with GAAP.
Reconciliation between GAAP and non-GAAP results are presented and the tables and our earnings release.
Finally, I would like to remind everyone. Today. This call includes forward looking statements. The company cautions investors that any forward looking statements involve risks and uncertainties and are not guaranteed and the future <unk>.
Actual results may differ materially due to a variety of factors identified in our earnings press release, and our most recent 10-K and 10-Q filed with the SEC we.
We do not undertake any obligation to update forward looking statements.
With that let me turn the call over to <unk>, Chairman, President and Chief Executive Officer, Mike Minogue based on.
Hey, good morning, everyone.
And I didn't have reported a strong start to our fiscal year 'twenty, 2 with global record revenue and record patient utilization and the U S Europe, and Japan, Inc.
And Q1, we delivered revenue of $253 million up 53% versus prior year and up 5% versus prior quarter.
Within the quarter, we achieved a 26, 2% non-GAAP operating margin, while continuing to invest with a focus on extending our lead and innovation advancing clinical evidence and building a premier commercial team.
Our balance sheet remains robust with $805 million and cash and zero debt, while acquiring free cardiac heart failure company.
We grew our IP portfolio to 1216, and pellet patents and over 1000 patents pending we have maintained our disciplined execution on our strategic goals and abiomed..2 <unk> continues to drive our success I am proud of our employees for their continued hard work.
And dedication to our patients and.
And mission of recovering hearts and saving lives.
On today's call I will highlight progress on our product innovation milestones for Impella, 5.5 and our T. The regulatory status for Impella ECP.
And briefly discuss our strategy to be the leading company for all cardiologists and heart Surgeons and every heart hospital, which means they have a cath lab and surgical suite.
Beginning with innovation the Impella 5.5 with smart assist continues to perform very well in the quarter. Our U S. Surgical revenue grew 115% year over year and 17% versus prior quarter as we expanded this life saving device to <unk>.
46 more sites or.
257 sites out of the 101113 heart hospitals in total and.
Impella 5.5 is a revolutionary product.
It does not require a sternotomy or coring of the left ventricle.
And it is a forward flow fully on loading winnable heart pump designed for heart surgeons to implant and less than 60 minutes.
And the axillary artery and the shoulder.
The minimally invasive and plant also allows for early ambulation for the patient, which correlates to faster recovery and better outcomes.
The longer usage time for the Impella 5.5 allows the smart assist software to track aortic pressure.
Jeff and tricky other pressure make predictive analysis on volume and right heart stability and.
And communicate in the cloud with Impella connect.
We look forward to continuing to roll this device out to the remaining 856 heart hospitals in the U S and many more outside the U S.
We also received FDA pre market approval for the Impella RP with smart assist as safe and effective to treat acute <unk> heart failure.
This smart pump is the next generation of right heart support and already has exclusive waning capability and FDA approval for right heart failure with multiple FDA studies and a recent emergency use authorization for COVID-19 patients with pulmonary embolus.
It is the first single venous access percutaneous heart pump with the sensor from the right ventricle.
The sensor technology provides real time guidance and trends that help with pump management and winning more.
Much of this groundbreaking information on the right ventricle will be published and will elucidate the field of right heart failure.
The Impella CP Impella, 5.5 and Impella RP now all utilized smart assist software enhanced with Impella connect to enable remote monitoring from any internet connected device through a secure HIPAA compliant web site.
The Impella connect software is now live at more than 80% of our U S sites and approximately 80% of our U S patients on support are monitored and the cloud.
No other company in this space offers this capability our 24 by 7 service to the hospital, which is ideal with Covid.
We also continue to accelerate the rollout of Impella connect and Germany and Japan.
Next we remain ahead of schedule on our Impella ECP early feasibility study.
Yes.
Impella ECP is the world's smallest heart pump and measures 9 French and diameter easing insertion and.
Removal from the body.
This allows for a smaller active site optum.
Optimal for protected PCI, which we believe will continue to drive better outcomes and overall utilization.
To date, we have achieved our initial FDA study milestones.
Enrolled 25 patients.
And submitted additional clinical data to the FDA for review.
We plan to expand this breakthrough technology to new sites.
With product enhancements already implemented and the DFS process to up to 50 patients.
In parallel and based on our interaction with the FDA. We have started to prepare the details of the single arm pivotal Impella ECP high risk PCI study.
And next quarter, we expect to confirm our I D E protocol and submit for approval with the goal to enroll our first pivotal patient for high risk PCI by the end of our fiscal year.
And we want to complement the FDA for this <unk> program overall, which allows for faster innovation and real time safety feedback and.
And accelerated access to new technology for U S patients.
Finally, our strategy to become the leading player.
For the heart team, which includes interventional cardiologists and heart failure, cardiologist Intensivists and heart surgeons grows stronger.
Our breakthrough platform now includes the Impella portfolio.
Ecmo with Breeze ex.
Pella and recently acquired pre cardio.
Pre cardiac was designated by the FDA as a breakthrough technology.
And will complement our existing product portfolio and.
Increased options for patients with acutely day compensated heart failure called a D H F.
And expand our relationship with heart failure specialists managing the ICU.
Heart failure is a leading cause of hospitalization and patients older than 65 years of age and we believe this device has the potential to be a revolutionary tool for the treatment of millions of patients and early stage a D. H F on new patient population for abiomed.
This strategic acquisition and combination with our continued impella 5.5 success and our future Impella BTR pump Mark Saad movement towards minimally invasive devices for the heart failure community.
Including our hub and spoke hospital network in every region of the country.
To further enhance these clinical efforts, we continued to invest and commercial excellence with a focus on the broader heart failure community and the referral network.
Specifically, we began our direct outreach referral programs that we expect will better identify the undertreated high risk PCI patient population of 440000 U S patients.
We continue to deliver best in class training and education by leveraging camp PCI and transition to both virtual and on site settings. We have seen physician traction on our educational platform through events, such as live cases, and advisory boards and are excited to expand camp PCI internationally.
And as well as at Camp Heart failure and camp Heart surgery this fiscal year.
Before I conclude I would like to share and inspiring patient story.
John Fisher 77 is a husband grandfather, and retired law enforcement officer from Ashland, Ohio.
John has been experienced chest pain for more than a year had been.
When the chest pain and became more severe following his recovery from COVID-19, he decided to seek treatment.
After an evaluation.
John was diagnosed with coronary artery disease and evaluated for coronary artery bypass surgery called cabbage surgery.
Due to a low ejection fraction of 15% and multiple co morbidities, including type 2 diabetes, John was turned down for surgery.
Interventional cardiologists, Dr. <unk> Touche mature determined John was a candidate for protected PCI.
With Impella, Dr mature inserted the Impella CP with smart assist while he performed a complete revascularization.
John Richard home 6 days later today.
Today his heart function is normal with the current E F. A 55% and he enjoys walking his dogs woodworking and spending time with his grandson, who happens to work at Abiomed and headquarters.
And closing.
We will continue to create and deliver value by successfully advancing our innovation and clinical research and commercial distribution.
We remain steadfast to our mission of creating the field of heart recovery and driving a new standard of care for multiple growing patient populations around the world Q.
Q1 was a solid start and we believe we are well positioned for success in fiscal year 'twenty 2.
I would like to thank our employees and customers for their dedication to the mission of recovering hearts and saving lives and we appreciate the ongoing support of our shareholders.
I would like to now turn the call over to Todd Trapp our CFO.
Thanks, Mike and good morning, everyone.
We delivered strong results and the first quarter of fiscal year 'twenty, 2 with revenue of 253 million and.
And increase of 53% versus prior year, primarily due to the recovery and patient utilization from COVID-19.
Starting with the U S. Total U S revenue grew 54% year over year to $207 million.
This growth was driven by a 43% increase and patient utilization favorable sales mix and a higher reorder rate.
We are encouraged by the continued recovery from Covid within the quarter as we continued to see patients working their way back into the system.
At the end of our fiscal Q1, and the U S. The CP and now 1005 hundred 28 sites.
We are placing impella, 5 <unk> and 665 sites and.
And the Impella 5.5 with smart assist is now on 257 sites up 46 sites versus prior quarter.
Lastly, the Impella RP is and 609 sites up 21 sites versus Q4.
Our U S reorder performance and the quarter was slightly above 100%.
And average combined inventory at the hospitals for the Impella 2.5 and CP was 4.7 units per site.
This is consistent with the inventory levels of the prior 2 quarters.
Outside the U S revenue totaled $45 million.
Up 51% versus prior year.
European revenue increased 64% year over year due to a strong recovery and patient utilization.
Favorable sales mix and a benefit from the foreign exchange rate.
Our Japan business delivered $11.3 million and revenue up 26% year over year.
Due to a 78% growth and patient utilization.
Setting lower site openings.
And the quarter, we opened 5 new sites.
And our total sites to 171.
This compares to the 10 site openings last quarter, and 13 site openings and Q1 of 'twenty 1.
We have seen some impact due to hospital restrictions related to COVID-19, and the summer Olympics, which limits our ability to train new sites.
But this is more timing as our backlog for new sites and Japan remains robust and we expect to open more sites and the second half of the year as vaccination rates increase and hospital restrictions ease.
Gross margin in Q1 was 82, 1%.
Compared to 78, 2% and the same period of the prior year.
390 basis point increase was primarily driven by higher volume and favorable sales mix.
Our Q1 GAAP financial results for the quarter are summarized in our press release and earnings deck.
For the remainder of the call I am going to provide the highlights of our financial performance on a non-GAAP basis in order to give greater transparency on the impact from the pre cardiac acquisition and to be consistent with our peers.
A full reconciliation between non-GAAP and GAAP results are summarized in our press release and earnings deck and are available on the investors section of Abiomed Dot com.
R&D expense for the first quarter totaled 38 million, a 43% increase from the prior year.
The increase was driven by clinical costs for protect 4 and semi GPU randomized control trials.
As well as our investments and new products, such as ECP and BTR.
We believe that clinical evidence and innovation of smaller smarter more connected devices will drive sustainable long term growth.
SG&A expense for the quarter totaled $103 million and increase of $35 million or 51% versus prior year.
The year over year increase is driven by head count additions to our distribution team.
Our direct to patient initiative.
Higher spend on training and education and.
And Covid related 1 time cost actions from the prior year.
Non-GAAP operating income grew 94% to 66 million and the quarter, which translated to non-GAAP operating margin of 26, 2% on.
Our margin expansion of 550 basis points was primarily due to higher volume, which more than offset our growth enhancing investments.
Non-GAAP net income for the quarter was $51 million or a dollar and 10 per share up 95% versus Q1 of 'twenty 1.
Our year over year performance was driven by higher volume and.
And a lower effective tax rate.
Our balance sheet remains debt free and we ended the quarter with $805 million of cash and marketable securities at.
After funding our strategic investment to acquire the remaining shares of pre cardiac.
In terms of full year guidance keep in mind that our fiscal year experiences seasonality.
Q2 is typically a slow quarter for all cardiovascular devices due a summertime slowdown and the cath lab and physician vacations.
And this summer we believe it is being even more exasperated based on the pent up vacation demand from Covid last year.
With that said, we expect Q2 revenue to be in line or slightly down from our Q1 record revenue performance of 253 million and our summer quarter.
As we transition to the back half of the year, we typically expect to see sequential lift in Q3 based on increased hospital activity and physician engagement.
And as we finished the fiscal year and Q4, our March quarter, we expect to deliver our best results.
Given our strong performance and the first quarter and our confidence and our outlook. We are now raising our full year revenue guidance and expect it to be and a range of $1.3 billion to.
To $1, <unk> 5 billion up 22% to 24% for the year.
This is an increase from our original guidance range of $990 million.
To $1.3 billion up 17% to 22% for the year.
The low end of our guidance assumes some continued unevenness due to the Delta variant.
At the high end of the range. Our assumptions include a normalized procedure cadence and the Cath lab and a minimal impact from Covid based on global vaccine distribution.
We expect non-GAAP operating margin to be and the 24% to 26% range.
In summary, we are encouraged by our first quarter performance.
We executed well and are building for the future through strategic investments and innovation clinical evidence and commercial excellence.
We are well positioned for a successful fiscal year 'twenty, 2 and beyond as we continue to build the new field of heart recovery.
Operator, please now open the line for questions.
Thank you as a reminder to ask a question you will need to press star 1 on can you tell us on so let's try a question press the pound key please standby, while we compile the Q&A roster.
Our first question comes from Margaret Kaczor with William Blair. Your line is open.
Hey, good morning, everyone. Thanks for taking the question.
And I wanted to start a little bit on the quarter. Obviously, you guys saw a nice uptick here and.
And I was hoping to go a little bit deeper into some of those drivers whether all things being equal excluding seasonality now that youre solidly into the screen phase you're ramping up from these initiatives and we've talked a lot about commercial initiatives last quarter and getting patients and so that that.
Funnel.
Is this something that's and that should continue to I guess get better as we go throughout this year and if you could talk about that cadence and what's included in guidance that'd be helpful.
Okay.
Great Margaret Thanks for the question I guess the answer is yes, because you've seen it now for 2 quarters and our grow and a row as we transition to green and now Green is our phase, which is abiomed 2 <unk> execution. So starting with is just the product innovation.
If you just break it out and look at the product growth.
CP grew 52%, which is primarily driven by existing indications we have today for high risk PCI and shock.
FIFO and $5.5 combined grew to 115% and that was driven by a 209% growth and $5.5 and.
Impella RP, which we're just starting now to rollout smart assist grew 71%. It is exclusive FDA approvals and is also approved for emergency use for Covid.
And Ecmo.
Our going slower to continue to evaluate and innovate and so the demand.
Does exceed our willingness to shift because it's similar to when we launched in Japan and the first year. So we've got lots of quarters ahead of just strong growth and those products on clinical research. We've got abstract presentations that are being converted.
Converted now to publications and the big ones are protect III, which is the largest prospective FDA study on high risk PCI, you've got restore EF, which is a best practice protocol.
Showing a permanent improvement and ejection fraction you have the completion of the <unk> presentation, which is going to publication and you also have the presentation going to publication for the Japan Impella.
Cardiogenic shock studies, so theres a lot of information plus theres, just tremendous momentum and excitement around <unk>, which now we've at least got to about half of our enrolled well sites and protect for which we have started to enroll and of course ECP.
Had a strong quarter and we were able to do another 15 patients since the last earnings call and then last as you pointed out we have made changes to the distribution. It's very focused now to strengthen our ability to move with speed, but also have a hub and spoke interaction. So that we continue to call on those.
Spoke accounts, which continue to grow even during COVID-19 as well as the network, where the hub centers, which are through the most high risk PCI and those complicated shock patients are transferred to they also saw growth so across the board existing indications shock and high risk PCI had strong.
Both we feel very confident coming out of Q1, but we've got more to do.
And.
And we're very excited now to just be executing and allowing us to treat more patients than ever before.
Okay.
Laundry list.
New R&D.
And as soon as that you've got but maybe let's focus a little bit on RP with smartest pet and you got approval for that can.
Can you give us thoughts around the ESP, whether it could be premium or is it. The same and then if we think about whether that that product could bring and saks off the sideline for like 5.5.
With axillary access is that a possibility and and how do you think about our controlled rollout.
For new product for years to come.
Yes, Marc and just to clarify I heard the first part on the RP with smarter says, but what was the connection to the 5.5 and cut out there.
Sorry, its more cannot bring questions off the sideline isn't it.
More material change sort of like FIFO and 5.5 was where it did actually bring docs on the sidelines.
Oh, absolutely so a few things on the RP.
<unk> can be put in and the Cath lab and is truly percutaneous. So thats unique but we also are designing that device. So that surgeons can put it through the jugular and.
It will be utilized that way so youll have the ability now and that will come at the end of the year, but we also are getting full support for surgeons that are already using the impella 5.5 so as you see from the numbers on the demand.
All of those products with the exception of 2.5%.
Or are increasing and for high risk PCI half of our patients for high risk PCI now our single assets.
Which is the preferred method with the leaders out there and so that really does address some of the ease of use and things around the cath lab.
For high risk PCI and remember when you do a single access they do the PCI and they also do the impella and the same whole rather than to hold so we've got a lot of momentum and where it comes together is in this heart team approach. Some of those patients that are high risk revascularization and get a cabbage with a fee.
5.5.
And some of those patients go to the Cath lab to get high risk PCI. So the network and the referral stream is coming together, but again, if you're in the field and you're a customer abiomed has all the new technology. We have the most clinical studies and we provide the best 24 by 7 and support that's also in the <unk>.
Cloud with the smartest system Impella connect platform.
Great. Thanks, guys.
Thank you. Our next question comes from Matthew O'brien with Piper Sandler Your line is open.
Good morning. Thanks, so much for taking the question so Mike just a little bit more on 505 can you talk about some of the earlier adopters of that technology, how they're ramping and then some of the backlog and the interest that you're seeing from all of these other higher hospitals out there to get access to that technology, and then and.
And then how we should think about the utilization.